Breach duty of care of consultant for wrong sales forecast?

This blog has already discussed several rulings on the issue of whether a franchisor can be held liable for issuing wrong sales forecasts. This case, however, deals with the liability of the franchisor’s consultant. Does such a consultant have an independent duty of care to inform potential franchisees correctly? Dutch franchise lawyer Hidde Reitsma discusses the court ruling.

Franchisee claims damage compensation in proceedings

In these proceedings the franchisee has summoned both the franchisor and his consultant. He claims damage compensation because he was provided with wrong sales forecasts and information in advance. The court states in the first place that a future franchisee can be expected to have a critical attitude concerning information on future sales provided by the franchisor. After all, the goal (and the interest) of the franchisor is to ‘reel in’ the potential franchisee.

Own obligation to investigate by the franchisee

Specifically with the franchisee in this case should have asked questions about the forecast. There was no indication on what information this sales forecast was based and because it concerned a new franchise formula, reliable data on turnover to be achieved and orders to be expected were not (yet) available. The franchisee should therefore have conducted his own investigation and the franchisor cannot be blamed for this, according to the court.

Duty of care consultant towards franchisee

It’s another matter for the consultant who negotiated with the franchisee under the franchisor’s assignment. The court considers that although the consultant did not have an (immediate) contractual relationship with the franchisee, because the consultant was closely involved in the conclusion of the franchise agreement and because he also had an advisory role for the franchisee, there was a certain trust relationship.

Care of reasonably skilled acting professional

The information on the sales forecasts that the consultant provided to the franchisee was solely based on statements by the franchisor. The consultant did not see nor ask any substantiation of those statements. A reasonably acting and reasonably skilled consultant who cares about the interests of his customer can be expected to check the numbers that he provides to his customer (or at least inform the customer that he has failed to do so). The consultant is held liable by the court for providing wrong information to the franchisee, who suffered a loss as a result.

There is no cause-and-effect relationship between the loss and the wrong sales forecast

However, the franchisee had only a short time to enjoy his victory. The court then ruled that it was not shown that there was a cause-and-effect relationship between the loss and the wrong information provided by the consultant. It was not proven that the information was decisive in the franchisee’s decision to enter into the franchise agreement. The consultant therefore escaped unharmed.

Breach of duty of care by consultants

There are many rulings about (the breach of) the duty of care. There are several professionals who have a duty of care, such as civil-law notaries, lawyers, accountants and financial consultants. The standard used is that a consultant, when given an assignment, has to act as a reasonable and skilled professional. What this means is different for each case. The AMS lawyers have a great deal of experience in professional liability cases. If you have any questions, please contact our firm.

Hidde Reitsma
Hidde has a varied consultancy and litigation practice, focusing on corporate law and insolvency law. He frequently acts in proceedings before the Enterprise Chamber of the Court of Appeal in Amsterdam and in cases on directors’ liability. Hidde also advises on drawing up and negotiating contracts, mergers and acquisitions and joint ventures. Follow Hidde also on Google or LinkedIn.
Hidde is available via e-mail and +31 (0)20-3080315.